Exploring the role of tariffs, the conversation reveals how these import taxes have historically sparked debate between protectionism and free trade. A lone economist defends tariffs as crucial economic tools, particularly within the context of the Trump administration. The story of Hyundai illustrates the power of government support in nurturing industries. Additionally, the podcast delves into how tariffs can function as a means of political influence, reshaping international relations and industry growth.
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Free Trade's Trade-offs
Free trade has downsides, including job losses due to foreign competition.
Economists and lawmakers previously prioritized free trade's benefits, but are now acknowledging the costs.
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Hyundai's Success with Tariffs
Hyundai, initially a construction company, became a car manufacturer with government support and tariffs.
South Korea banned foreign car imports to protect its infant auto industry.
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Infant Industry Protection
Infant industry protection involves using tariffs and subsidies to help new industries grow.
These protections must be temporary to avoid creating inefficient, perpetually subsidized companies.
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In 'Kicking Away the Ladder', Ha-Joon Chang challenges conventional wisdom by highlighting that developed countries used protectionist and interventionist policies during their development, which they now deny to developing nations. The book argues that these policies were crucial for economic growth and that developed countries are 'kicking away the ladder' by advising developing countries to adopt different policies. Chang's work provides a historical perspective on development strategies and critiques modern economic orthodoxy.
What are tariffs good for?
For years, mainstream economists have basically said: tariffs are not good. They are an import tax paid by consumers, they've said, and they discourage free trade, and we want more! Because free trade has broadly led to more global economic growth.
But global trade hasn't been all positive for Americans, and in the worldview of President Trump's administration, tariffs can be used to right some of those wrongs. And the U.S. has economic leverage. So if the U.S. wants to level the playing field, it should use that leverage, and use tariffs to accomplish its policy goals.
Today on the show: the case for tariffs. We talk to a lonely economist who's been sounding the alarm for years that more and free-er trade isn't always better. And we speak to economists in President Trump's orbit who make the case for how tariffs can be a potent economic and political tool.
This episode was produced by Willa Rubin and edited by Meg Cramer. It was fact-checked by Sarah McClure and engineered by James Willetts. Alex Goldmark is our executive producer.
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